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WASHINGTON — A mixed picture of U.S. banks emerged Tuesday as the industry posted its highest quarterly earnings in nearly three years while the number of troubled institutions grew by more than 50.

Banks overall made $21.6 billion in net income in the April-to-June quarter, the Federal Deposit Insurance Corp. said. It was the highest quarterly level since 2007 and was led by the largest institutions. The industry lost $4.4 billion in the second quarter of 2009.

But the number of banks on the FDIC's confidential "problem" list increased by 54 in the quarter — growing to 829 from 775 in the first quarter. Most of the banks that have failed this year have been smaller or regional banks.

The decline in bank lending stemming from the financial crisis showed signs of leveling off, the data show. Total lending declined by $107.5 billion, or 1.4 percent from the first quarter. It posted the steepest drop since World War II — 7.5 percent — in 2009 from the year before.

FDIC Chairman Sheila Bair said banks' lending standards are beginning to ease for some types of credit.

"But lending will not pick up until businesses and consumers gain the confidence they need to hire and spend," Bair said.

She said the economic recovery is starting to be reflected in banks' higher earnings and the improved quality of loans, with fewer defaults and delinquencies.

For the first time since late 2006, banks overall set aside less to cover future losses on loans than they had a year earlier, the FDIC said. Total reserves declined by $11.8 billion, or 4.5 percent.

Biggest banks
The biggest banks have mounted a strong recovery with help from federal bailout money and record-low borrowing rates from the Federal Reserve. They also have been able to cut back on lending in troubled parts of the country such as Florida and Nevada.

Smaller and regional banks, however, have less flexibility. They have accounted for nearly all the banks that have failed this year.

The FDIC's deposit insurance fund, which fell into the red about a year ago, posted a slight improvement. Its deficit declined to $20.7 billion from $20.9 billion.

The FDIC expects U.S. bank failures to cost the insurance fund around $100 billion through 2013. The agency mandated last year that banks prepay about $45 billion in premiums, for 2010 through 2012, to help replenish the fund.

Last year, 140 federally insured institutions failed and were shut down by regulators. It was the highest annual number since 1992, when the savings and loan crisis hit its peak. Last year's failures extended a string of collapses that began in 2008, triggered by loan defaults in the financial crisis.

The pace of bank collapses this year exceeds last year's. So far, 118 banks have failed in 2010. The pace has quickened as banks' losses mount on loans made for commercial property and development. Many companies have shut down in the recession, vacating shopping malls and office buildings financed by the loans. That has brought delinquent loan payments and defaults by commercial developers.

Depositors' money — insured up to $250,000 per account — isn't at risk. The FDIC is backed by the government.

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